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Income-Based Repayment

There are multiple loan repayment programs based on income.  The two main plans have been Income-Based Repayment (IBR) and Income-Contingent Repayment (ICR). Both IBR and ICR provide affordable monthly payment amounts. Under both plans, any remaining loan balance is forgiven after 25 years, and payments made can count toward the 120 payments required for Public Service Loan Forgiveness.

There are important differences between IBR and ICR. IBR applies to both the Federal Family Education Loan Program (FFEL) and the Federal Direct Loan Program, while ICR is only available for Federal Direct Loans. IBR does not apply to PLUS Loans or consolidation loans that include PLUS loans, while ICR does include Direct PLUS loans that are part of a Federal Direct Consolidation Loan.

As of December 21, 2012, eligible borrowers of federal student loans may enroll in the new “Pay as You Earn” program. The new income-based repayment plan caps monthly loan payments at 10 percent of a borrower’s discretionary income. After 20 years of payments, the government will forgive the loans. (The Education Department’s older income-based repayment program currently caps monthly loan payments at 15 percent of discretionary income, with loan forgiveness after 25 years.) The new program will accept enrollees who were new borrowers after October 1, 2007, and who also took out a loan on or after October 1, 2011.

For more detailed information about the multiple federal student loan repayment options, please visit the following sites:

Federal Student Aid Understanding Repayment

Federal Student Aid Repayment Plans

Federal Student Aid Repayment Estimator

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